Raise a back-charge

Recover cost from a subcontractor — cleanup, rework, delay damages, or other costs incurred because of the sub's actions — by raising a negative-value variation against the subcontract.

When to use this

When you need to charge the subcontractor for cleanup, rework, delay damages, or other costs incurred because of the sub's actions, and you want the recovery reflected against the subcontract's value (rather than as a separate Debit Memo).

Prerequisites

• Subcontract in Active, PC, DLP, or Final status
• A clearly-defined cost amount and reason — which SoV line(s) are affected, if any
• The sub has been informed in writing (process — not enforced by the system)
• Permission to create and approve variations for this subcontract's subsidiary

Walkthrough

1. Open the Subcontract record and click New Variation.
2. Set the Variation Type to Cost Decrease or Defects (the type that best matches the reason).
3. Set the Reason to the appropriate code (e.g. Defects, Error).
4. Enter a negative-value line — either a standalone deduction line, or a deduction linked to a specific SoV line so the recovery is traceable.
5. Add a clear description in the Variance Note so the audit trail captures the reason.
6. Submit the variation, then Approve it through the normal variation workflow — see Approve a subcontract variation.

The negative variation amends the PO downward and reduces the Revised Contract Value. The next claim the sub raises will reflect the reduced contract value.

When to use a Debit Memo instead

If the back-charge needs to be visible to AP as a separate posting (rather than netted into the subcontract value), raise a Debit Memo against the vendor instead. The Debit Memo is independent of the Subcontracts feature — it's standard NetSuite AP. Use the variation approach when you want the recovery reflected on the subcontract's contract value; use a Debit Memo when you want the recovery posted as a separate AP transaction.

What success looks like

• A Variation record on the Subcontract, with Type Cost Decrease or Defects and a negative value, in Approved status.
• The Subcontract's Revised Contract Value has reduced by the back-charge amount.
• Subsequent claims by the sub reflect the reduced contract value.
• The audit trail records the back-charge reason, approver, and approval date.

Gotchas

• The back-charge can't reduce the contract value below the amount already claimed and paid. The variation approval gate enforces this — if it blocks, you're trying to recover more than is mathematically available against the contract.
• No sub-acknowledgment step exists yet. Coordinate with the sub before approval, especially if the back-charge is contentious. The dedicated Back-Charge workflow (roadmap) will add an explicit acknowledgment step.
• Variations of type Defects may need separate evidence. Attach photos, inspection reports, or correspondence to the variation record so the audit trail is complete.
• A back-charge raised this way is irreversible by the same mechanism. If you need to reverse it, raise another offsetting variation with a positive value.

Related

• Approve a subcontract variation
• Assess a subcontractor claim
• Subcontract states